CVS Caremark (NYSE: CVS ) has raised its annual guidance by $0.03 to between $3.18 and $3.28. Reason: Higher-than-expected gains from the Walgreen (NYSE: WAG ) and Express Scripts (Nasdaq: ESRX ) spat.
In CVS CEO Larry Merlo's words, "The pharmacy customer is the hardest person to lose, but once you lose them, it's the hardest person to get back." With customers unable to fill out their prescriptions at Walgreen's stores, companies such as CVS and Rite-Aid are welcoming them with open arms. As Walgreen and Express take longer and longer to resolve the issue, CVS continues to benefit. According to Merlo, the number of prescription transfers has been higher than expected.
While the break-up didn't have any significant effect on CVS' fourth-quarter results, 2012 paints quite a different picture. To get some idea of how much there is to gain, here are a few numbers: Last year, Express contributed $5.3 billion to Walgreen's top line, about 7% of its total revenue. No wonder CVS is upbeat about 2012.
Beyond the tiff
Although the rift did not affect CVS' fourth-quarter top line, the company's pharmacy services revenues for the quarter still rose a staggering 32.4% to $15.9 billion. The rise is attributable in part to the long-term contract between CVS and health insurer Aetna (NYSE: AET ) . The two have entered into a 12-year strategic alliance where they'll provide high-value pharmacy plans. Overall, revenues rose 15%.
CVS has a lot to look forward to this year. How much it actually stands to gain from Walgreen's misery remains to be seen. But CVS will look to make the most of it. We at The Motley Fool will keep you up to date on all the latest to hit the drug retailing space. Simply click here and add any of these companies to your watchlist. It's free, and you can start today using the links below. Fool on!